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Republicans Ready For Another Debt Ceiling Fight While Voting To Increase Debt

Republicans would have you believe that the economy, the deficit and even much of our long-term debt is on the shoulders of President Obama. Republicans in the House, particularly Tea Party Republicans, threatened to ruin the credit worthiness of the United States (although many would not acknowledge it) in last summer’s debt ceiling showdown. In fact, just days after they reached an agreement to increase the debt ceiling, Standard & Poor’s downgraded the credit rating of the U.S. government bond for the first time ever.

The amazing thing during that nonsensical debate was that a number of these Tea Party Republicans, including GOP presidential candidate Michele Bachmann, believed that there would be no harm if we failed to increase the debt ceiling. Let’s make one thing clear, it’s a rare person in this country who wants to see bigger deficits and more long-term debt if we can avoid it, but the debt ceiling is about debt we’ve already incurred. I have no better term to use than “reckless” to describe these Tea Party Republicans who had no problem risking (and ultimately achieving) a credit downgrade for the United States. If they had not reached a deal, the credit downgrade that resulted would be the least of our worries.

Debt that we’ve already incurred is money that we’ve already spent. Somebody expects to get paid. And contrary to popular belief, the biggest holders of U.S. debt are not foreign countries but instead Americans. We own the majority of our own debt. It’s in pension plans, 401Ks and other investment products. So, we are only screwing ourselves if we think we can get out of paying our debt obligations. But this is apparently too complex or simply too far outside the narrative for Tea Party Republicans to understand.

Now Speaker of the House, Republican John Boehner is threatening another debt ceiling showdown. The debt ceiling is likely to be reached before the end of the year. Will we have a repeat of last summer? Will the United States get downgraded yet again? Are Republicans credible when it comes to fiscal responsibility? On that last question, I think the clear answer is no:

Chris Hayes (from Up with Chris Hayes on Sunday, May 20, 2012):

Yesterday, the Republican controlled House passed the defense authorization bill, adding $8 billion more to the spending caps and last year’s budget, and almost $4 billion more than President Obama requested, which of course is par for the course. For all their railing against the debt, Republicans are almost always happy to pile it on when they’re running things.

So you see, Republicans can pile on the debt when it’s something they want. Just look at the eight years under President George W. Bush when we had the biggest increase in the long-term debt than any previous president in history. Unfortunately the cratered economy and tax cuts that Bush passed on to the next president means we are seriously piling on the debt now trying to dig out of the worst recession since the Great Depression. We have no choice, unfortunately.

Republicans think their message of fiscal responsibility will work with voters, and maybe this time they are really serious about fiscal responsibility and cutting the debt, but it would be at exactly the wrong time. Republicans had their chance to be good stewards of fiscal responsibility when they were handed a massive federal budget surplus from President Clinton. They squandered that surplus in the form of tax breaks for all, but especially for the rich along with two unfunded wars and an unfunded Medicare prescription drug benefit. At the time George W. Bush took office, we already had many trillions of dollars of debt, but Republicans decided it was a good idea to give us all tax breaks instead of paying down the debt. After giving us a tax cut they gave us another tax cut two years later, but this time after starting two unfunded wars. It’s the first time we cut taxes during wartime in our history. Does this sound like fiscal conservatism to you?

The Republican Party of 2012 is even more radical when it comes to irresponsible fiscal policy. They believe in lowering taxes and never raising them again under any circumstances. They believe in deep cuts to education and the social safety-net. Basically, the Republican vision for America is one where a few mega-wealthy individuals will have all the power and all the money. In a few decades, if Republicans get their way, the United States will no longer be a democracy, it will be an oligarchy. Hell, maybe it already is.

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Some might see it as a noble refrain to say we shouldn’t use a tragedy to advance a political agenda (e.g. guns, confederate flag). But, it shouldn’t always be seen that way. First, this notion assumes all political agendas are equally sincere and rational, when we know this to be false. Some agendas are immensely more honorable than others. Second,…Read On…

Fact: Federal taxes, as a money-raising tool, are unnecessary,harmful and futile — unnecessary because since 1971 (when the U.S. government became Monetarily Sovereign) the government has had the unlimited ability to create money without taxes, harmful because taxes reduce the money supply, which reduction leads to recessions and depressions, and futile because tax money sent to the government is destroyed as a balance sheet credit.

http://leftcall.com/ David K. Sutton

This is nonsense. Yes, it is true that the U.S. government can print money at will, but when they do so they decrease the value of the dollar. So far this has not led to massive inflation, in fact, inflation has remarkably been quite low for a while now. And for this reason I’m a supporter of more stimulus spending (American Jobs Act). But to say that taxes are unnecessary and harmful, this is just make-believe-land. Government provides services. We should pay for these services. Government can run a reasonable deficit in order to keep the machine running. When we have good economic times we should try to get our fiscal house in order. When the economy is still recovering, we should keep spending to stimulate the economy. But to say that we can pay for all our services simply by printing money is reckless.

steveiii

Fact: The debt/GDP ratio does not measure the federal government’s ability to pay its bills. The government does not pay bills with GDP; it creates the money ad hoc to pay its bills. Were GDP to be $0, the government still could pay bills of any size, simply by crediting the bank accounts of its creditors.

steveiii

Facts: In 1979, gross federal debt was $800 billion. In 2009 it reached $12 trillion, a 1400% increase in 30 years. During that period,GPD rose 440% (annual rate of 5.5%>) with acceptable inflation. The same 1400% increase would put the debt at $180 trillion in 2039, a mean annual deficit of $5+ trillion.
This calculates to a 9.5% annual debt increase for the past 30 years. Repeating that growth rate would put the 2010 deficit at about $1.14 trillion, and the 2011 deficit at about $1.25 trillion. The deficit for year 2039 would be about $15.8 trillion.

steveiii

The finances of the federal government are different from yours and mine and businesses’ and state, county and city government finances. Unlike the federal government, which is Monetarily Sovereign, we cannot create unlimited amounts of money to pay our bills. We first need to acquire money, either by borrowing or by saving, to spend.
The federal government does not acquire money. It creates money by spending. As an accounting principle, the tax money you send to the government is destroyed upon receipt. Then the federal government creates new money to pay its bills. The government has no fund from which it pays bills.
Fact: Were taxes to decrease to zero, this would not change by even one penny, the federal government’s ability to spend.
Fact: The federal government has the unlimited ability to create the dollars to pay any bill of any size. It never can run short of dollars; it never can go broke.

http://leftcall.com/ David K. Sutton

Yes, this is correct. This is why the Republican argument that equates the government’s finances with a business or family is bunk. It’s not a license of reckless fiscal policy, but if government needs to spend money to get the economy going (because nobody else can or will) then it needs to do so.